Why India’s recent report on a fall in out-of-pocket health expenditure may not be accurate

On November 29, the Ministry of Health and Family Welfare released the National Health Accounts estimates for India. The Health Accounts is a globally accepted tool to describe the flow of funds in a country’s health system in a financial year. Its estimates provide a snapshot of the flow of funds in the country’s health system by financing sources, providers of healthcare and healthcare functions.

It allows health administrators to learn from past expenditures trends and improve planning and allocation of financial resources, thereby increasing efficiency and accountability. The estimates are useful only if they are comparable over time and across administrative areas like countries or across states.

The ministry provides stewardship in the production of the estimates in India. Earlier estimates of the National Health Accounts from the ministry are available for 2001-’02 and 2004-’05. Policy planners, researchers, academicians, organisations and state governments are dependent on the National Health Accounts, to obtain reliable and comparable estimates of health spending in India.

What estimates showed

The most salient feature publicised by the ministry during the recent release of the National Health Accounts estimates is the rise in government contribution to the total health expenditure from 29% in 2013-’14 to 41% in 2017-’18, leading to a decline in household out-of-pocket expenditure by the household 64% to 49% in the same period.

According to the report, the per capita health expenditure in India is Rs 4,297 and figures in constant prices indicate that this indicator has remained stagnant in the last five years. Further, it is mentioned that there is a decline in total health expenditure as a percentage of GDP from 4.2% in 2004-’05 to 3.3% in 2017-’18.

Such a shrinking in financial space occupied by the health sector is totally unexpected considering the nature of the expansion of healthcare-related infrastructure, manpower and technologies in the country in the last two decades. Hence there is a need to revisit the estimation procedure as current estimates are against the structural expansion in the country’s healthcare sector.

The sharp decline in the share of out-of-pocket expense in total health expenditure in a single financial year (59% in 2016-’17 to 49% in 2017-’18 in National Health Accounts 2017-’18) is an error.

Household out-of-pocket expenditure on health or the direct payment incurred by the patient or their family while seeking medical care is only noted in countries with poor governmental commitments to provide health care both in terms of provisioning of services as well as in fostering risk pooling mechanisms that provide health security to its citizens.

According to the World Health Organization health expenditure database, at the global level, about 42% of total health expenditure is financed through household out-of-pocket expenditure, India is one of the worst defaulters and is ranked 15th out of 188 countries in terms of high out-of-pocket expenditure on health. Studies have already indicated that a sizeable section of Indian households is experiencing out-of-pocket expenses on health induced poverty.

Out-of-pocket expenditure estimates are derived from the national sample survey data released by the National Statistical Office earlier known as the National Sample Survey Organization. National Statistical Office has been engaged in conducting socio-economic and institutional surveys every year to provide the information required for planning developmental policies in India.

Surveys in certain years are devoted to healthcare consumption that provides information on the level of utilisation of healthcare services as well as household out-of-the-pocket expenditure. These National Statistical Office surveys are the major source of data for the preparation of the National Health Accounts estimates of out-of-pocket expenditure in India.

Incorrect estimations

In a healthcare system driven by household out-of-pocket expense finances as in the case of India, any decline in same should have automatically reflected in an overall hike in government expenditure on health.

The producers of the National Health Accounts should have rigorously analysed the National Statistical Office data while preparing National Health Accounts estimates and about flaws in making direct comparison of utilisation data between the last two rounds National Statistical Office surveys on health consumption carried out in 2014 and 2017-’18.

The sharp decline in out-of-pocket expenses and increase in government health expenditure in 2017-’18 is an outcome of incorrect estimations from the producers of the National Health Accounts. According to National Statistical Office reports there is a nearly 20% decline in proportion seeking outpatient care services in India and a 25% decline in proportion seeking hospitalisation services, between 2014 and 2017-’18.

Such type of aberrations is expected if these time points have witnessed any national-level calamities, an epidemic or economic crisis. In the absence of this inter-survey period, the decline in the is only due to survey related errors leading to under or overestimation of healthcare consumption in either of the two rounds of surveys.

The authorities engaged in the preparation of the National Health Accounts estimates under the ministry should have ideally checked the same with their governmental counterparts in National Statistical Office under the Ministry of Statistics and Programme Implementation.

More contradictory is the fact that Economic Survey 2020-’21 brought out by the Ministry of Finance highlights that the share of out-of-pocket expenditure in the total health expenditure in India will decline from 65% to 30% if there is an increase in government spending on health from 1% to 2.5-3% of GDP.

The way ahead

There is insufficient evidence that those involved in the production of National Health Accounts estimates made efforts to investigate this paradox while witnessing a reduction in their out-of-pocket expense estimates without any sizeable improvement in governmental spending on the health sector.

Hence there is a lack of evidence to claim that government investments in the health sector have led to a reduction in the burden of out-of-pocket expenses on health in Indian households.

Further, we would like to bring out the fact that only 30% is from the central government and state governments contribute to 70% of the total government health expenditure.

The high out-of-pocket expense is due to a lack of governmental priority for strengthening health sectors since independence. Though there is a marginal increase in government health spending during the existing tenure of the government the actual expenditure is just half of the governmental health spending target mentioned in National Health Policy 2017.

Hence to attain a real reduction in out-of-pocket expense the Union and state governments must primarily focus on adhering to health financing targets and strengthening risk pooling mechanisms to improve the health security of the citizens. The National Health System Resource Centre, the nodal agency under the Ministry of Health and Family Welfare entrusted with the production of National Health Accounts in India need to reexamine their estimates, to sustain its credibility and usefulness in health planning at the national and sub-national level.

Continuing with this error in the National Health Accounts estimates in the production of official statistics may lead to other issues that could be political.

The views expressed in this article are those of the authors and not the organisations to which they are affiliated.

TR Dilip is a faculty at the International Institute for Population Sciences, Mumbai.

Sunil Nandraj is a health researcher and has worked with the World Health Organization and was a former advisor to the Ministry of Health and Family Welfare.